Unanimous Decision

The U.S. Supreme Court puts reins on a core U.S. environmental statute used as a lawfare weapon by opponents of energy infrastructure projects.

“The sword of justice has no scabbard.” - Antoine de Riveral

In a quiet, rural corner of northeastern Utah, about 100 miles southeast of Salt Lake City, the nation’s second largest Indian reservation sits in a high mountain basin with a population of under 70,000 people spread across 10,000 square miles. The Uintah and Ouray Reservation covers nearly 4,000,000 acres in the Uinta Basin, of which the Ute tribe (from which the State derives its name) owns ~1,200,000.

The Uinta basin has produced oil for decades. Conventional oil production peaked in the 1980s at around 44,000 barrels per day (bpd) before dropping to ~20,000 bpd in the early 2000s. But as with other geologic basins in the U.S., fracking gave new life to the Uinta in the 2010s. The 1980’s production “peak” now looks quaint in the rear-view mirror (if you can see it at all). Today, the Uinta basin produces about 175,000 bpd, and with fracking’s constantly improving technology that figure stands to double (or more).

But there’s a hitch. Uinta Basin crude is a waxy, medium light form, characterized into two types based on API gravity (yellow and black, with black slightly heavier). Its higher paraffin, lower sulfur composition has desirable characteristics for lubricating oils and other specialty products for Gulf Coast and other refiners with the capabilities to process waxy crudes.

But at ambient temperatures, those waxy crudes tend to solidify, so pipeline transport is not a feasible option. Most product gets heated and sent in insulated tanker trucks from the Basin to refiners in the Salt Lake City area or nearby rail terminals. Those unique physical characteristics and a rural location lacking infrastructure create well recognized gating functions limiting production.

The white dots aren’t earth with measles. They’re well pads.

About ten years ago, seven counties in the Basin operating as the Seven County Infrastructure Coalition (SCIC) undertook an effort to alleviate the constraint. They proposed a new rail line to transport Uinta Basin crude ~100 miles southwest to connect to the nationwide rail system.

New rail lines in the U.S. require approval from the U.S. Surface Transportation Board (STB). Applicants for new short tracks that meet certain requirements can apply for an exemption from the STB’s formal “prior approval” process.

Using that exemption, in May of 2020, SCIC applied to the STB to construct and operate an approximately 88-mile rail line - the Uinta Basin Railway - connecting two terminals in the Basin to the national rail network via the Union Pacific line at Kyune, Utah. That UP line runs east through Denver and beyond and would connect Basin oil fields with refining infrastructure from Oklahoma to the Gulf Coast.

Under the National Environmental Policy Act (NEPA), one the earliest environmental statutes in the U.S., the STB’s approval would constitute a “major Federal action” significantly effecting the environment. Accordingly, STB was required to perform an Environmental Impact Statement (EIS) before a final decision approving the Railway.

At that point, SCIC’s project got hamstrung by a legal challenge based on one of the oldest environmental laws in America. The law is commonly wielded as a weapon to delay or terminate energy infrastructure (and other) projects, and in this case was used by a county government in an adjacent state and environmental non-governmental organizations (ENGOs).

In the 21st century, unanimous Supreme Court decisions on significant environmental cases have been rare (two, by our count). But the Supreme Court rendered one the SCIC case two weeks ago, on May 29^th.

The Court’s decision sets a significant new precedent for the National Environmental Policy Act (NEPA). How did the Court rule? On what grounds? And what are the implications for ENGOs use of NEPA as a weapon to delay or stop hydrocarbon energy projects because of greenhouse gas (GHG) emissions and climate change? Let’s review the decision and speculate about how it might affect ENGO’s NEPA-related oil and gas industry lawfare.

We begin the story with a very brief overview of NEPA. Congress passed the statute in December 1969 and President Nixon signed it into law on January 1, 1970, in response to growing public awareness and outrage over clearly apparent and widely publicized industrial pollution. Six months earlier the Cuyahoga River in Cleveland caught fire for the tenth time in just over a century. Five months prior to that the Santa Barbara oil spill captured the nation’s attention. Both occurred in the decade Rachel Carson published the highly influential book Silent Spring warning of health risks from environmental contamination related to industrialization and chemical compounds. An increasingly prosperous nation in the wake of World War II finally decided enough was enough.

NEPA was the predecessor to the Clean Air Act (later in 1970), the Clean Water Act (1972), the Resource Conservation and Recovery Act (RCRA,1976) and Superfund (the Comprehensive Environmental Response, Compensation and Liability Act, 1980). The law applies to any “major project” (federal, state, or local), including those receiving federal funding, work performed by the federal government, certain permits issued by a federal agency, and many others.

In a nutshell, NEPA requires that agencies evaluate the relevant environmental impacts of “proposed actions” involving major projects. When a proposed action falls within NEPA, the law requires different levels of analysis depending on the situation, the most rigorous of which is an Environmental Impact Statements (EIS). An EIS is required when the action does not a) fall with a defined NEPA Categorical Exclusion or, b) when eligible, an Environmental Assessment (EA, an abbreviated version of an EIS) renders anything other than a Finding of No Significant Impact (FONSI).

ENGOs have made stopping or delaying energy infrastructure projects by challenging NEPA-required EISs into a legal sport over the last two decades. For their part, lower courts have enabled this, overstepping their bounds by failing to defer to agency discretion with respect to consideration of environmental impacts in EISs. Together, they have significantly delayed important projects for seemingly speculative or distant environmental impacts. Dozens of examples exist, but one particularly relevant to SCIC’s case demonstrates the point.

The Sabal Trail Pipeline (Southeast Market Pipelines Project) is a pipeline spanning Alabama, Georgia, and Florida that provides natural gas to power plants. The project required permits from the Federal Energy Regulatory Commission (FERC). Sierra Club and other ENGOs challenged FERC’s decision and its EIS, arguing it failed to adequately assess downstream greenhouse gas emissions (GHG’s, principally CO2) from the combustion of natural gas transported by the pipeline, ultimately bringing the case to the D.C. Circuit Court.

The Court ruled FERC’s EIS was deficient because it did not sufficiently quantify or consider those downstream GHG emissions, which the court deemed the project’s “entire purpose.” The court held that FERC, as the permitting agency, had a duty under NEPA to evaluate these emissions, given their foreseeability. Those specific findings turn out to be highly relevant to SCIC’s case.

FERC complied by supplementing its EIS. The pipeline was ultimately approved and constructed.

Returning to the Uinta Basin Railway project, SCIC’s application for an exemption to permit the construction and operation of the Uinta Basin Railway required STB to conduct an EIS. In January 2021 the STB issued its first decision that, subject to completion of that document, the project met the statutory standards for the requested exemption on the merits. That action was challenged by ENGO petitions for reconsideration, all of which were denied by STB in late September that year.

STB’s Office of Environmental Analysis issued the draft EIS fall of 2020. The final EIS, issued in August 2021, consumed 3,600 pages (link to the documents here.)

The document identified one of the three proposed alternative rail line routes (the “Whitmore Park Alternative”) as the “Environmentally Preferable Alternative” to mitigate impacts. That route is shown in the image below (from the EIS).

In December 2021, the STB voted to approve SCIC’s exemption from its “prior approval” requirements and to approve its construction and operation of the Uinta Basin Railway. It imposed specific environmental mitigation measures outlined in an appendix to its order.

Days after that decision, Eagle County, Colorado and five ENGOs - Center for Biological Diversity, Sierra Club, Living Rivers, Waterkeeper Alliance, and WildEarth Guardians - petitioned the STB for reconsideration. But Eagle County and the ENGO parties had no intention of waiting for the Board’s response (it rejected their petitions in May 2022). They filed suit against the STB in D.C. District Court in February 2022 alleging deficiencies in the Board’s EIS.

Both of their cases were grounded in environmental impacts that were either far removed from the project site or completely outside the STB’s regulatory authority and control. Eagle County alleged STB’s EIS either ignored or underestimated the environmental impacts increased oil tanker traffic (estimated at 4-11 trains/day) would have on the County and Colorado river if the rail line were approved. The ENGO’s argued that STB’s EIS should have given more consideration to the environmental consequences (specifically GHG emissions) that would result from additional oil production in the Uinta Basin as well as the combustion of the fuels that would be refined, from Oklahoma to the Gulf Coast.

In August 2023, the D.C. Circuit Court rejected some of the petitioner’s claims but sided with them on others. Agreeing with Eagle County, it ruled that STB’s EIS contained errors related to the Union Pacific rail line running through the County and threats to the Colorado river.

In agreeing with the ENGO petitioners the Circuit Cout channeled the Sabal Trail Pipeline ruling, noting among other things that the Board should have (emphasis added):

“estimated the emissions or other environmental impacts” of oil refining as localized for the “specific regions that will receive the oil based on expected train traffic.”

It also found that “reasonably foreseeable environmental harms” were within the STB’s statutory obligation when considering whether projects “serve the ‘public convenience and necessity.”

But the Seven Counties Infrastructure Coalition was not done with the matter and filed a petition for a writ of certiorari (review) by the U.S. Supreme Court in March 2024. The Supreme Court agreed to hear the case in June 2024. The case was argued before the court in December last year.

Two weeks ago, the Court rendered an 8-0 unanimous decision in favor of SCIC. (Justice Gorsuch recused himself due to a past relationship with Phillip Anschutz. Anschutz Oil has wells in the Uinta basin). It reversed the D.C. Circuit Court’s decision and remanded the case for further proceedings “consistent with this opinion,” holding that (emphasis added):

“The D. C. Circuit failed to afford the Board the substantial judicial deference required in NEPA cases and incorrectly interpreted NEPA to require the Board to consider the environmental effects of upstream and downstream projects that are separate in time or place from the Uinta Basin Railway.”

Justice Kavanaugh wrote the Court’s opinion, which was joined by Justices Roberts, Thomas, Alito, and Barrett. Kavanaugh’s twenty-two-page opinion can be summarized by three key points.

First, while NEPA is designed to make sure agencies and the public are aware of the environmental consequences of “proposed actions,” it is “a purely procedural statute that does not mandate particular results,” or any particular outcome in terms of how potential environmental impacts are addressed. Rather, it merely specifies the necessary process for environmental reviews (i.e., EA or EIS). Federal courts reviewing NEPA cases have become too aggressive, tending to police NEPA compliance without affording agencies the deference required in the statutory text and by past Supreme Court rulings.

Agency determinations about what details are relevant in a NEPA-required EIS are entitled to judicial deference. The details of what needs to be included in an EIS are factual determinations best left up to the agencies who have a level of subject matter expertise the courts do not.

Second, the D.C. Circuit erred in its NEPA analysis, wrongly determining that the STB’s EIS should have evaluated possible environmental effects from upstream and downstream projects separate from the Uinta Basin Railway. The opinion references NEPA’s text which focuses on the “proposed action.” It noted that:

“While indirect environmental effects of the project itself may fall within NEPA’s scope even if they might extend outside the geographical territory of the project or materialize later in time, the fact that the project might foreseeably lead to the construction or increased use of a separate project does not mean the agency must consider that separate project’s environmental effects. This is particularly true where, as here, those separate projects fall outside the agency’s regulatory authority.”

In legal terms, the fact that Uinta Basin production and Gulf Coast refining are separate projects from the Railway breaks the chain of proximate cause between the “proposed action” and the environmental consequences of those other projects, thereby negating any requirement to consider them. The Court additionally noted that under NEPA, agencies are required to consult with other agencies as appropriate but are not obligated to consider the environmental consequences of projects for which they exercise no regulatory authority.

Third, Courts may not delay or block a “proposed action” based on the environmental consequences of other separate projects “under the guise of judicial review” of agency compliance with NEPA.” And citizens may not enlist the courts under those same pretenses. As Kavanaugh’s opinion notes:

“…neither “the language nor the history of NEPA suggests that it was intended to give citizens a general opportunity to air their policy objections to proposed federal actions. The political process, and not NEPA, provides the appropriate forum in which to air policy disagreements.”

Justice Sotomayor, joined by Justices Kagan and Jackson, penned a separate opinion in which she agreed with the ruling, but grounded it in Supreme Court precedent vs. matters of policy. Her opinion states that court review of an agency’s EIS is a two-step process. In the first, courts must consider the grounds on which an agency may modify (“mitigate”) or reject a proposed federal action under their “organic statute.” If the statute precludes an issue from consideration, the agency may similarly disregard it from its NEPA analysis.

In the second, if an agency decided not to review an environmental impact because it was too disconnected from the project (the “proposed action”), courts must decide whether the agency acted arbitrarily, while giving appropriate weight and deference to the agency’s subject matter expertise. Justices Sotomayor, Kagan, and Jackson concluded the SCIC case did not survive the first step.

Justice Sotomayor’s opinion further relies on the STB’s organic statute, the Interstate Commerce Commission Termination Act. As she noted (emphasis added):

“As common carriers, railroads subject to the Board’s jurisdiction are required to provide ‘transportation or service on reasonable request’ to any person or commodity.

Short of rejecting the Railway entirely…the common carrier mandate prevented the Board from mitigating, by limiting the transport of crude oil, the Railway’s spurring of the oil industry.”

(Those interested in reading the full details of the ruling, the precedents cited, and the Justice’s opinions can find the full document here.)

The Supreme Court’s ruling in favor of Seven County Infrastructure Coalition sets a precedent that has significant implications for U.S. oil and gas development and related pipelines, railways, and infrastructure. Agencies are only required to analyze environmental impacts that have a “reasonably close causal relationship” to the project and that are within the agency’s statutory authority to prevent or regulate. The environmental effects of upstream (e.g., increased oil drilling) or downstream (e.g., refining) projects that fall outside their regulatory jurisdiction, including GHG emissions associated with those projects, no longer need to be considered.

The decision reduces the likelihood of successful NEPA EIS challenges based on speculative or indirect impacts such as future oil production increases or distant GHG emissions. Federal agencies will now have greater discretion over the scope of their EIS analyses and will be entitled to greater deference about technical judgments when deciding which environmental consequences those reviews must analyze.

Because the ruling confirms NEPA is a procedural statute that informs but does not mandate or paralyze agency decision making, it should expedite the approval process for energy infrastructure projects. More broadly, the ruling effectively overturns prior lower court decisions like the D.C. Circuit’s Sabal Trail Pipeline decision that required FERC to consider a broad range of indirect, upstream, and downstream environmental effects, including greenhouse gas emissions from the end use of transported fuels.

For oil and gas producing states and regions, the ruling should help facilitate expansion of those resources by constraining a major regulatory obstacle too often used to delay or block projects. ENGOs lost a favored lawfare tool – using NEPA to force agencies to consider greenhouse gas emissions not directly tied to major federal “proposed actions.”

We close by noting that NEPA is a critical statute for ensuring public and agency knowledge and input about the environmental impacts of “major” federal actions, but it is sorely in need of statutory reform. As Justice Kavanaugh’s opinion noted, lower courts have strayed from NEPA’s statutory text and Supreme Court precedents, thereby delaying or blocking projects and causing litigation-averse agencies to take years to produce thousand-page EIS reports (emphasis ours):

“NEPA has transformed from a modest procedural requirement into a blunt and haphazard tool employed by project opponents (who may not always be entirely motivated by concern for the environment) to try to stop or at least slow down new infrastructure and construction projects. Some project opponents have invoked NEPA and sought to enlist the courts in blocking or delaying even those projects that otherwise comply with all relevant substantive environmental laws.

All of that has led to more agency analysis of separate projects, more consideration of attenuated effects, more exploration of alternatives to proposed agency action, more speculation and consultation and estimation and litigation. Delay upon delay, so much so that the process sometimes seems to “border on the Kafkaesque.”

Kavanaugh was diplomatic to use the terms “sometimes” and “border on.” Exactly what statutory reforms are needed, and realistically how likely are these in the present hyper-partisan American political era? These are questions for a future post.

For now, the Supreme Court’s ruling shortens and dulls ENGO’s NEPA sword. The decision is an important, valuable precedent and a step in the right direction.

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